Wednesday, November 7, 2007

The Continuing Bloodbath

"But calling this crisis a sub-prime meltdown is ludicrous as by now the contagion has seriously spread to near prime and prime mortgages. ... And it is spreading to every corner of the securitized financial system. ... The reality is that most financial institutions ... have barely started to recognize the lower 'fair value' of their impaired securities. Valuation of illiquid assets is a most complex issue", Nouriel Roubini at, 6 November.

Excellent post with a good discussion of the accounting issues involved. Bernard, a blog contributor noted that Goldman Sachs (GS), yes those guys again, has level three assets of 185% of its capital base. Who knows how big an asset writedown GS needs?

I have been leery of securitized assets since 1997 when David Bowie sold $55 million in bonds which were backed by 10 years of royalties from 287 of his songs.

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